Will AR Fuse Online and Offline Shopping?

Among the areas that AR will transform, shopping could have the most economic impact. AR is already making its mark in e-commerce through product visualization like IKEA and BMW. But could it do even more in brick & mortar shopping?

As we’ve examined, e-commerce represents a small share of retail spending. Of the $3.7 trillion spent in the U.S., about $3.4 trillion is in physical stores. But it’s important to note that online and mobile media increasingly drive and influence that offline spending, to the tune of about $2 trillion.

And that’s where AR will come in. Its well-suited for qualifying products in the physical world through informational overlays. Holding up your phone is more intuitive than typing words into Google or Amazon in a store aisle. And camera affinity is strong among millennials and Gen Z.

Best of Both Worlds

The best way to think about AR’s utility in retail is fusing the best of e-commerce and in-store experiences. The reasons offline shopping dominates include immediate gratification and the need to see/touch products — especially big ticket items like TVs, cars and couches.

But what about the advantages of e-commerce? There’s more supply, transparency, cost efficiency, inventory (a.k.a “endless aisle”) and ability to dynamically search and filter product attributes. But AR can engender a sort of hybrid UX that brings these features to store aisles.

One example is Walmart, which built an AR prototype app to assist in-aisle product engagement. When pointed at a shelf of cosmetic products — a sku-intensive category — it filters attributes like price and color, just like an e-commerce UX. It then highlights items that match the filter criteria.

“When I say ‘physical to digital’ I mean it literally: smash them together, “said Walmart’s Steven Lewis in reference to the app, on stage at AWE in June. “You choose filter criteria and it narrows down and filters out what you don’t want to see. That’s kind of like an e-commerce experience.”

It’s All About Utility

The guiding principle in all of the above is AR that’s truly useful and drives recurring engagement. And that’s all about designing experiences for everyday people. This invokes a fundamental success factor in XR and tech in general: solve human problems, not engineering ones.

“You don’t want to build something and spend millions of dollars and it’s a one-time experience,” said Lewis “That one-time experience may be may be amazing… but we try to make sure that we build it so it works for everyone — not just the one-time use but for continuous use.”

Beyond the benefits to users — which of course drives repeat business and ARPU metrics for retailers — there are direct retailer benefits. For example, the AR in-aisle engagement uncovers shopping data that informs everything from inventory management to optimal store layouts.

“There’s lots of analytics you can get as a retailer or brand when you actually have someone with a mobile device, or headset in the future, looking at your products,” said Lewis. “Retailers today try to guess your dwell time… there could be a whole lot of [AR] analytics that would be helpful.”

For example, one of the benefits and drivers for Google’s VPS is to report/attribute in-store sales to advertisers to validate their ROI. This last mile to the cash register has always been a gray area in ad effectiveness despite the fact that it, again, is where most spending happens.

Showrooming, All Over Again

AR in retail will also be the latest evolution in showrooming — using the mobile device’s connectivity and portability to inform in-store purchases (or order online). And just like show-rooming over the past decade, the losers in the next era of retail will be those that try to fight it.

We’re currently seeing lots of examples of this “adapt or die” principle with retailers embracing digital disruption. There’s a growing divergence in the retail sector where digital converts are thriving and exceeding quarterly revenue targets, while non-adaptive companies are dying.

The former include companies like Target and Walmart that are innovating with in-store digital shopping tools, mobile payments and order/pick-up features. The latter include companies like Toys ‘R Us and Circuit City that failed to embrace mobile tech and millennial proclivities.

The next step in that trend will be AR and other flavors of in-store digitization — like our longstanding prediction for in-aisle payments. Retailers will have to look beyond next quarter to bring these technologies to their aisles, and control their own destinies. If not, someone else will.

Bottom line: Amazon is closing the gap on e-commerce disadvantages (with things like AR product visualization). So retail stores that fail to likewise close the gap on the disadvantages of in-store shopping (with things like in-aisle AR product filtering) will lose the battle for retail’s next era.